Article Archives >> Behind the Numbers >> October 16-31, 2004
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BEHIND the NUMBERS
Allocating Your Costs Correctly:
Knowing the difference between Program, Fundraising, and Administrative
Costs
Excerpt
The need for cost allocations among programs and supporting services
at a nonprofit organization is a fact of life. There are several
reasons why you must allocate your costs: your management team needs
to see exactly where its money is going to better run the organization,
board members need to look at cost allocations to see how well your
organization is performing, funders may request a break-down of
expenses, the public needs to know how much of each dollar they
contribute goes toward meeting your mission, and finally, the IRS
requires this break-down of expenses on your annual 990, and accounting
rules require it for your annual audit. If cost allocations are
so important, why do so many nonprofit organizations have difficulty
doing this? Where do cost allocation rules come from? What are the
practical issues in implementing them?
Article Archives >> Behind the Numbers >> October 16-31, 2004
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